Millennials And Impact Investing: A Striking Pair For A Broadening Sector

Lisa Cox is a writer and the Communications Manager at the Sorenson Impact Center; she holds a master's in journalism.

Go to any social impact conference, and you will probably hear, “Soon, there will be no ‘impact’ investing. It will simply be investing.”

Indeed, with a rising group of Millennial investors rushing the field, the idea that impact investing might soon dominate investors’ way of thinking is increasingly conceivable. A study released this year found that “more than half of Millennial investors (52%) see the social responsibility of their investments as [ ...] important selection criteria, compared with less than 30% of WWII-era investors and 42% of Gen X investors.” This proclivity for social good paired with the storied $30 billion intergenerational wealth transfer that is predicted to go to Millennials over the next 30 years could be a recipe for major growth in the impact investing arena.

The intersection between philanthropy and investing—impact investing.Nocturnal Motion Design

But aside from the much-discussed social consciousness of Millennials, perhaps another dynamic is also at play: the desire for instant gratification, a characteristic widely thought to be strong among Millennials. After all, why wait to make a positive impact on the world when you could do it now?

The younger generation may see billionaires such as Bill Gates and the legendary Rockefellers as inspirational business people, but they may question the old guard style of first spending precious time trying to make billions of dollars and then endeavoring to better the lives of others. The concept of impact investing, or pursuing both a financial return at the same time as a positive social impact, allows young people to strive toward both simultaneously.

Brandon Montenegro, an MBA student (and Millennial) at the University of Utah who holds a fellowship at the Sorenson Impact Center, explained why a shift from traditional investing to impact investing struck a chord with him: “I’ve had my views challenged on what it means to be an investor. The traditional view is that, on the one hand, you make investments to make money, and on the other hand, once you’re rich, you donate and you do charity. But this traditional worldview doesn’t actually make sense,” he said. “Because what you’re doing to make money, a lot of times, is causing the problems that you’re later donating to solve.”

Some of the addressable problems might include air pollution, limited access to clean water, hunger, mental health, lack of education, and homelessness, to name a few. Still, solving these intractable problems with return-seeking investment dollars requires rethinking conventional capitalism and continuing to shift the mindset of traditional investors toward impact.

Impact investors seek what is known as the double bottom line return—both a financial and social return.Nocturnal Motion Design

Skeptics of impact investing might say that impact investors are trying to ride two horses by seeking the dual prizes of financial return and social impact. To this, one influential impact investor, the septuagenarian venture capitalist Sir Ronald Cohen, said in an interview in December, “We’re not trying to ride two horses, we’re harnessing them.”

But whichever side of the fence an investor may be on, it’s difficult to deny that impact investing is making waves. Citing the Global Impact Investing Network (GIIN), CNBC reported in May that “In 2017 an estimated $139.9 billion was invested in impact investment strategies … up more than 10-fold since 2014, when the amount was $10.6 billion.”

Meanwhile, a Thomson Reuters Foundation news article stated that Toniic, an investment club for impact investors around the world, reported “its members now have a combined $2.8 billion in so-called impact investments,” which is up over $1 billion since 2016.

But the growth of impact investing today has been decades in the making. The Rockefeller Foundation asserts that the term “impact investing” was coined in 2007 by leaders in finance, philanthropy and development that had convened at the foundation’s Bellagio Center in Italy, a retreat location on the shores of Lake Como that exists to “promote the well-being of humanity around the world.”

What may have been contained to the shores of Lake Como more than a decade ago, is now part of the discussion in executive boardrooms, foundation offices, statehouses, and start-ups around the world. More and more people are aware of the social issues plaguing the planet, and an increasing number of investors, businesspeople, and philanthropists are willing to shift their traditional approaches to address it. And as socially-conscious Millennials garner more power and push for quicker solutions, the movement should only grow.

The Sorenson Impact Center guides communities, governments, nonprofits, social enterprises, impact investors and philanthropists to social impact through policy innovation, data science and impact capital. The Sorenson Impact Center is part of the University of Utah’s Eccle...